Opinion
Pinch every penny? Not if you want to actually get ahead
Paridhi Jain
Money contributorHave you heard that old saying, “If you watch the pennies, the dollars take care of themselves”? It sounds like good advice, but it’s not.
An obsession with quick savings hacks can give you the illusion that you’re being financially responsible by constantly chasing nifty ways to shave a few dollars off your expenses.
While you’re collecting points to get $50 off or scouring aisles for discounts, you’re probably not focused on bigger long-term problems.Credit: Simon Letch
This can fuel spending anxiety and perfectionism. You become hyper-aware of the price of everything, constantly look for bargains, and second-guess spending decisions. “Is it worth it?” “Do I really need this?” “Can I get this cheaper elsewhere?”
This might sound like a good thing, but having spent years helping people turn their financial lives around, I’ve noticed that people who watch pennies can get fixated on penny-sized problems. They fall into the trap of becoming “penny-wise, pound-foolish”.
After all, you can’t fix $100,000 problems when you’re busy fixing $100 problems.
While you’re collecting points to get $50 off your next holiday or scouring aisles in the grocery store for discounts, you are probably not focused on problems that are worth more to you in the long run. Researching a better-performing super fund, learning about tax saving opportunities, or learning to invest, will have a bigger impact long-term than hunting for cheaper petrol.
Am I saying penny-pinching is bad? No. There are stages in your financial journey where this strategy can be useful. The question isn’t whether it’s good or bad, it’s whether this strategy is helping you create the life you really want.
Given how heavily reinforced penny-pinching is all around us, it can be difficult to see when this strategy is helping or harming. Here are some questions that can help:
- Has penny-pinching become part of your identity? When you do it enough, penny-pinching becomes part of your identity. You might start to feel proud, accomplished, and maybe even a little smug, finding the cheapest prices. You might start to identify as and become known by your friends as the person who always finds the best bargains. That’s who you are now, it’s part of your personal brand. But is it working for you, or are you now just doing it out of habit?
- Are you using it as an avoidance strategy? What aspects of your financial life are you avoiding dealing with? Do you feel overwhelmed by the idea of sorting out your superannuation? Does the idea of learning to invest fill you with fear? Do you close your eyes and hope for the best every year at tax time? Is penny-pinching a convenient distraction, allowing you to feel like you’re being financially responsible whilst avoiding all these other areas of your financial life?
- What is the real cost? Yes, there’s a financial cost. You might be missing the forest for the trees, prioritising the little wins over the big wins. But there are other costs. Do you enjoy constantly worrying about price tags, or would it be nice to be able to spend without anxiety? What is the impact of penny-pinching on your relationships with family and friends? Can you enjoy your life and money the way you want with this strategy?
When you do it enough, penny-pinching becomes part of your identity.
Shifting out of the penny-pinching starts with recognising you have a choice: you can spend your whole life chasing pennies, or you can decide to focus on the big things that matter.
If that’s a shift you’re ready to make, here are some steps you can take that will help:
- Heal your emotional relationship with spending money so it doesn’t trigger so much guilt, shame and fear, and you can spend with enjoyment and ease. This means you’ll need to stop seeing spending money as a “bad thing” and start seeing it as something you can do with intentionality and purpose and that can add value to your life.
- Build an automated cash-flow system that manages your income on autopilot so you know your expenses, savings and investments are already taken care of, and you’re freed up from having to worry about every little expense.
- Set up financial defences (like personal insurance) to protect against crises so you can get out of survival mode and start living a bolder life free from financial worry.
- Follow an investment plan that caters to your goals and risk tolerance so you can confidently grow your wealth without worrying about market ups and downs.
You will create way more financial ease when you stop focusing on small things that make little difference and start focusing on big things that make all the difference.
This will allow you to live a bigger life without stressing over the little things. It turns out that when you watch the dollars … the pennies take care of themselves.
Paridhi Jain is the founder of SkilledSmart, which helps adults learn to manage, save and invest their money through financial education courses and classes.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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